Experts take stock of Nigeria’s financial sector

In 2018 the financial sector recorded positive developments but not without challenges.

Some of the positive developments included the stability of the foreign exchange market; the increase in the financial inclusion rate, occasioned by emergence of finance technology firms, which made the increase possible.

The exchange rate, which had failed to exceed N365 at the black market and N305 to the dollar at the official window were indication of a stable exchange rate.

During the year under review, the increase in crude price from about 30 dollars per barrel in early 2018 to 80 dollars per barrel before declining to 52 dollars per barrel in December was a boost to the economy.

Kudos to agitators in the Niger Delta region who sheathe their swords, and ensured that the country emerged from economic recession in 2017.

The introduction of finance technology firms, into the financial space, which boosted the Federal Government’s effort to reduce the number of Nigerians, who are unbanked to about 20 per cent by 2020 was a boost to agent banking and the economy.

Through firms, banks have been able to reach a larger number of their customers, mostly in the rural areas.

Some financial experts said in Lagos while reviewing the activities of the financial sector for 2018 that they foresee a much lower percentage of the unbanked by 2020.

Mr Niyi Ajao, Managing Director, Nigeria Inter Bank Settlement System (NIBSS), said that for most parts of 2018, one million bank accounts were opened monthly by Nigerians.

Ajao said that the nation’s financial inclusion rate as at November increased to 63.6 per cent from 45.4 per cent recorded in 2016.

Ajao said with the rise in the rate, the efforts of stakeholders in the financial industry were beginning to pay off.

He, however, said that there was need to do more if the country would meet the 20 per cent exclusion rate by 2020.

The experts said the Central Bank of Nigeria’s (CBN) National Financial Inclusion Strategy (NIFS) of 2012 and the CBN draft guideline on the licencing and regulation of Payment Service Bank (PSB) released in November may be a key driver of Nigeria becoming one of the world’s largest economies in no distant time.

The Chairman of Board of Enhancing Financial Innovation and Access (EFINA) , Mr Segun Akerele, said about 41 million Nigerians were financially excluded with the bulk of it coming from the north-west, north-east and north-central.

He noted that this formed the basis of targeting the areas that were yet to feel the impact of financial services.

“In Nigeria today, we have 41 million people that are excluded and we have a target of 20 per cent exclusion by 2020,” he said.

According to PWC 2017 FinTech Survey Report, over 62 per cent of customers will use mobile applications to access financial services within the next five years.

However, some banks are not comfortable with the development.

The President of the Bank Customers Association of Nigeria (BCAN), Dr Uju Ogubunka, said that the banks had the right to be concerned about the development.

Ogubunka said that was because they know telecomm companies had the financial capability to compete with them.

He said regardless of what happens later, the most important thing should be effective service delivery in order to boost financial inclusion in the country.

The former Registrar of the Chartered Institute of Bankers of Nigeria (CIBN), said the higher the financial inclusion, the better for the economy.

In spite of the positive development, the banking sector witnessed liquidity challenges that forced two banks to cease operations.

The operating licence of Skye Bank Plc was revoked by the CBN during the year, two years after the takeover of its board and management.

The bank was later to be known as Polaris Bank Ltd., as a bridge institution, with the Asset Management Corporation of Nigeria (AMCON) recapitalising it to N786 billion.

The Finance Minister, Mrs Zainab Ahmed in the year directed the CBN and the Nigeria Deposit Insurance Corporation (NDIC), to investigate and prosecute Directors and Executive Management culpable for its eventual collapse.

The minister also ordered the investigation of other deposit money banks and expressed serious concern over the spate of non-performing loans in the banking industry.

She said that the investigation was necessary to stabilise the banking sector.
Also in December, Diamond Bank merged with Access Bank after an alleged persistent breach of governance rules.

However, the bank said that the aim of the merger was to create Nigeria’s and Africa’s largest retail bank by customer-base.

Prof. Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria (CIBN), said the merger between the two banks was a different picture from that of Skye Bank.

Ajibola said the decision was a proactive step when compared to that of Skye Bank because the investors in the Diamond Access banks’ merger were not known.

“With this development, one expects a strong, virile and capable institution in the future that will equally protect the interest of the investors.

Mr Muda Yusuf, Director-General, Lagos Chamber of Commerce and Industry (LCCI) also said the merger would boost stability and investors’ confidence in the banking system.

Yusuf said the merger was a welcome development, which might have averted possible crisis in the future.

Also, the CBN website on Dec. 28 showed the nation’s reserves dropped to 41.52 billion dollars as at Nov. 22, from the 47.87 billion dollars recorded in May, 2018, representing a 13.25 per cent drop.

The nation’s external reserve was 23.6 billion in October 2016.

Reacting to this, the Head of Research at FSDH, Ayodele Akinyunmi, said the downward difference could be attributed to foreign investors’ pull-back from the Nigerian market.

Akinyunmi said the increase in demand at the foreign exchange market also affected the reserves.

According to him, the favourable crude oil price at the international market boosted the accretion to the nation’s external in the year.

He, however, said that if global oil price dropped significantly below 50 dollars per barrel, the Federal Government might be forced to adjust the oil price benchmark in the 2019 budget.